R.S.O. 1990, C. S.5, AS AMENDED
921159 ONTARIO INC., 918211 ONTARIO INC.

April 9, 10, 11, 14, 15, 17, 21, 22, 23, 24, 25, and May 5, 8, 1997
John F. Howard, Q.C., Chair
G. Patrick H. Vernon, Q.C. Commissioner
Lawrence E. Ritchie For the Staff of the
Sonia Bjorkguist Ontario Securities Commission
Nancy Roberts
Darryl T. Mann For Peter Arthur Mitchell
Duncan Embry
Allan Sternberg For Glen Erikson and Christine Erikson



(May 26, 1997)

1.00 Introduction

1.01 This Decision and the Reasons will deal with all the preliminary motions which are outstanding in this matter before it proceeds to a hearing on the merits.

1.02 The proceedings began, originally, by a Notice of Hearing and Statement of Allegations dated December 15, 1993. At that time, there were twentyRespondents. The number of Respondents had been reduced to sixteen by the end of February 1996 so that an amended Notice of Hearing and Statement ofAllegations were filed dated March 1, 1996. It is not necessary to recount in detail the reasons for these changes. Suffice it to say that they were the result ofdecisions not to proceed on the part of staff, settlements and, in one case, dismissal by the Commission as against some Respondents when Commission counselsought an adjournment which was opposed.

1.03 On March 21, 1997 an Order (1997-OSCB 1575) was made pursuant to a settlement agreement which reduced the number of Respondents to the fourcorporations and six individuals set out in the style of cause above.

1.04 Needless to say, since 1993, there have been numerous preliminary motions in this matter before various panels of Commissioners. Again it is not necessaryto recount these in detail. On March 6, 1997 the then outstanding preliminary motions came on for hearing before this panel in view of the fact that a hearing onthe merits was scheduled to begin Apr 2, 1997. As recounted in our Decision and Reasons of March 10, 1997 (1997 OSCB 1333) motions to stay for delay andmotions for disclosure and particulars were denied and the parties were advised to ensure that all remaining preliminary motions were ready to proceed on April2, 1997 when it was the intention of the panel to hear and dispose of them and, depending on the decisions on those motions, should no stay or adjournment begranted to then proceed with the hearing on the merits.

1.05 On April 2 and 3, 1997, we dealt with motions for production and for viva voce evidence from members of the Commission staff and delivered our Reasonsof April 4, 1997 (1997 OSCB 1835) which resulted in evidence from three persons limited to the issues raised by motions to dismiss for failure to meet limitationperiod requirements.

1.06 Another panel of the Commission heard a motion on April 8, 1997 seeking an order to quash the proceedings as against Peter Arthur Mitchell becausecertain without prejudice settlement correspondence between counsel for Mitchell and counsel for the Commission had been delivered to other respondents in thecourse of delivering motion material. The motion was denied and Reasons were delivered April 15, 1997 (1997-OSCB 2045).

1.07 This panel heard evidence on April 9, 10, 11, 14, 15, and 17 and argument on all remaining motions on April 21, 22, 23, 24, 25, May 5 and 8, 1997. Wedelivered Decision and Reasons on a motion to quash a summons to a prospective witness on one of the remaining motions April 24, 1997 (1997 20 OSCB2401). There remains three sets of motions which we will deal with in the order in which we heard argument under the short form headings Rule MakingMotions, Procedural Fairness - Abuse of Discretion Motions and Limitation Period Motions.

1.08 Before doing so, however, we propose to list the material which was before us in addition to the material listed in our Decision of March 10, 1997.

17C Staff's Book of Authorities - Volume 3 (In Response to the Systemic Bias Motion) submitted April 23, 1997

18A Motion Record of Peter Arthur Mitchell dated March 31, 1997 (Limitation Period Motion)

18B Factum of Peter Arthur Mitchell dated March 31, 1997 (Limitation Period Motion)

18C Book of Authorities of Peter Arthur Mitchell dated March 31, 1997 (Limitation Period Motion)

19A Motion Record submitted by Goodman and Carr dated March 27, 1997

19B Factum of Glen Erikson and Christine Erikson

19C Brief of Authorities on Behalf of Glen Erikson and Christine Erikson

20A,B,C Motion Record, Factum and Authorities before Panel on Motion April 8, 1997

21A Motion Record of Peter Arthur Mitchell dated March 31, 1997 (Rule Making Authority Motion)

21B Factum of Peter Arthur Mitchell dated March 31, 1997 (Rule Making Authority Motion)

21C Book of Authorities of Peter Arthur Mitchell dated March 31, 1997 (Rule Making Authority Motion)

21D Brief of Documents of Peter Arthur Mitchell (Rule Making Authority Motion), Vol. I

21E Brief of Documents of Peter Arthur Mitchell (Rule Making Authority Motion) Vol. II

22 Staff's Written Submissions and Authorities dated April 1, 1997 (In Response to the Examination of Staff and Limitation Issues)

23A Staff's Written Submissions (In Response to the "Rule Making Motion" - April 1997 Motions)

23B Staff's Written Submissions (In Response to the "Rule Making Motion" - April 1997 Motions)

A1 TSE Investigation Report of Belteco Volume 1 (Later Exhibit 42A)

A2 TSE Investigation Report of Belteco Volume 2 (Later Exhibit 42B)

B1 TSE Investigation Report of Torvalon Volume 1 (Later Exhibit 43A)

B2 TSE Investigation Report of Torvalon Volume 2 (Later Exhibit 43B)

B3 TSE Investigation Report of Torvalon Volume 3 (Later Exhibit 43C)

B4 TSE Investigation Report of Torvalon Volume 4 (Later Exhibit 43D)

1.09 In addition during the proceeding commencing April 2, 1997 documentary exhibits numbered from Exhibit 14 to 41 and from 44 to 52 were received.

1.10 It is perhaps unnecessary to have listed all this material which measures some 113 centimetres (44 inches) in shelf space. We do so to demonstrate howpreliminary motions can, indeed, take on a "life of their own". All of the motions current and former have involved submissions that the Commission lacksjurisdiction through bias perceived or actual or that proceeding on the merits would amount to a denial of natural justice on other grounds. We recognize, ofcourse, that there is abundant authority for the proposition that administrative tribunals ought not to proceed where the matter being dealt with is in excess of itsjurisdiction, but if matters are to be dealt with in a reasonable time frame and without substantial cost to the parties and the tribunal which are currently notrecoverable, it appears, at least to this panel, that some consideration should be given to permitting costs to be awarded against parties bringing preliminarymotions which ultimately prove to be unsuccessful.

1.11 We now proceed to deal with the remaining preliminary motions.

2.00 Rule Making Motions

2.01 The argument on this motion was made on behalf of Peter Arthur Mitchell ("Mitchell") by Mr. Embry. His motion seeks an order quashing the allegationagainst Mitchell or, in the alternative, an order staying the hearing of those allegations until the determination of an application for a judicial review of theDecision of the Commission in the Matter of Marchment & MacKay Limited et al. (1996) 19 OSCB 6637 (the "Marchment Case"). Mr. Sternberg brought asimilar motion on behalf of his clients and adopted the submissions of Mr. Embry with some additional submissions particularly relating to his client.

2.02 We were advised that the hearing of the application for judicial review is scheduled to be heard in the Divisional Court May 26, 1997. As will be apparentfrom the alternative relief sought, the grounds advanced upon this motion for the applicant are to a great extent similar to the grounds argued by the Applicantsin the Marchment Case. Mr. Embry, in opening his arguments, submitted that the grounds for his motion were so similar to those advanced in the MarchmentCase that for that reason alone the hearings should not proceed until the application for judicial review has been determined. He also pointed out that he wouldbe advancing additional grounds to quash the allegations against Mitchell which had not been considered by the Commission in the Marchment Case.

2.03 The basis for the motion to quash because the proceedings are beyond the jurisdiction of the Commission in the Marchment Case are summarized in theCommission Decision at (1996) OSCB 6637 and the arguments advanced there are summarized in nine numbered paragraphs which immediately follow. Most ifnot all of these arguments have been advanced again in this hearing albeit in somewhat different words. We do not propose to deal with each of the arguments indetail. We are content to adopt the Reasons for Decision in the Marchment Case in full.

2.04 It should be observed, however, that in opposing these motions, Counsel on behalf of the staff submitted that the allegations and the ruling in theMarchment Case relate to the public interest jurisdiction of the Commission to monitor sales practices of Securities Dealers in the light of the specific history ofproceedings before the Commission relating to Securities Dealers and their sales practices. It was then argued by staff counsel that in contrast to the proceedingsin the Marchment Case, the allegations here against Mitchell and the Eriksons relate to their involvement in specific transactions and conduct that it is alleged arecontrary to the public interest. It was also pointed out by staff counsel that in the course of previous preliminary motions, the Commission has held explicitly thatthe Eriksons and Mitchell "are not penny stock dealers" and that "the allegations in these proceedings as they relate to them do not relate to sales practices ofpenny stock dealers" and that in these proceedings these respondents are not "targeted dealers" and that the allegations made against them "do not involveallegedly improper sales practices" as those phrases are used in the Marchment Case. Re Belteco Holdings Inc. et al. (1996) 19 OSCB 6623 at 6628-29.

2.05 The Respondents on the other hand answered this submission by pointing out that while the Respondents are not Securities Dealers, the acts which arealleged against them are directly involved in what was described as the "front end" of the activities which lead to the allegations of improper sales practices bySecurities Dealers in what was described as the "back end" of the activities involved.

2.06 We do not accept this submission on behalf of the Respondents. In our view, the allegations against the Respondents in these proceedings as they are nowconstituted do not involve the sales practices of Securities Dealers but rather whether the Respondents engaged in conduct which was contrary to the publicinterest contrary to certain specific sections of the Securities Act and the Regulations under that Act. Therefore, even if the Commission lacks jurisdiction toproceed against Securities Dealers such as Marchment & MacKay Limited because of the history recounted in the Marchment Case (a proposition which we donot accept at this time), it is our view that the Commission does have jurisdiction to proceed with the allegations against these Respondents.

2.07 That being said, we will now deal with the two submissions made which, it is submitted, distinguish this case from the Marchment Case. They are:

(a) In the Marchment Case, the Commission did not consider changes in the legislation made after the two cases cited by the Commission in support of itsconclusion that it is not necessary for the Commission to find a breach by a registrant of the Act or the Regulations in order to warrant the imposition ofsanctions under subsection 127(1) of the Act. It was submitted that this was not argued in the Marchment Case and that the changes would alter the conclusionreached.

(b) In any event, section 221 which is cited in paragraph 14(c) of the Statement of Allegations as against Mitchell is invalid and accordingly can not form thebasis for an allegation of misconduct.

2.08 The two cases cited by the Commission in the Marchment Case are two cases in the Court of Appeal in Ontario which clearly rejected the proposition thatthe Commission must find a breach of some provision of the Securities Act before it can discipline a registrant under the Act. The cases are (1) Re The SecuritiesAct and Gardiner et al. (1948) OR 71, and (2) Re The Securities Commission and Mitchell (1957) OWN 595. In the Marchment Case, the Commissionextended this proposition to non-registrants based upon the finding of the Divisional Court in Re CTC Dealer Holdings Ltd., et al. and Ontario SecuritiesCommission et al., (1987) 59 OR (2d) 75 which followed the Court of Appeal in Gardiner and Mitchell and extended the principles involved to non-registrants.It is our understanding that Mitchell is or was a registrant although the Eriksons were not.

2.09 As we understand the argument now being advanced, it is that at the time of Gardiner and Mitchell the jurisdiction being exercised was administrative innature and in one case vested in the Chairman. Since that time, the framework of the Act has changed and the Securities Commission now proceeds to exercisequasi judicial power after a proper hearing on proper evidence. It is further argued that this change in the status and in the Act require a higher standard and are-thinking of the principles of the administrative law as they apply to disciplinary proceedings before the Commission. For example, it is pointed out that a highstandard of proof is required in proceedings before administrative tribunals where a person's licence to continue in his profession is at risk. Reference was madeto Bernstein and the College of Physicians and Surgeons Ontario (1977), 15 OR (2d) 447 at 485. It is then argued by analogy that there is now a requirementimposed by the quasi judicial nature of the proceedings for a complaint to be based upon specific requirements of conduct as set out in the governing statutes.

2.10 This is an extension of the argument made before us and in the Marchment Case that to hold otherwise would confer an "unfettered" discretion on theCommission. We do not agree with the argument and adopt the finding of the Commission in the Marchment Case that the scope of the Commission'sjurisdiction under the Securities Act is primarily to be determined by reference to sections 1.1 and 2.1 of the Act. We reject the argument that the conduct andaction complained of in the Notice of Hearing and Statement of Allegations amount to the imposition of obligations and standards that are beyond the scope ofthe Act and the Regulations. We note also, in any event, that in the allegations against the Eriksons, conduct is alleged to be contrary to five specific sections ofthe Act as well as to be contrary to the public interest. The allegations against Mitchell relate to two sections of the Regulations and accordingly even if theconclusion in this regard in the Marchment Case is incorrect, there would still be allegations left to be dealt with in these proceedings.

2.11 The second distinguishing feature advanced in argument is that section 221 of Regulation 1015 which is referred to in the allegation against Mitchell inparagraph 14(c) is invalid and accordingly cannot be the foundation for a charge.

2.12 This submission is based upon the decision of Fairgrieve, Prov. J. in R. v. Haldenby (1994), 17 OSCB 4311 in which he found section 222(1) of theRegulation to be invalid primarily on the ground that it sought to impose codes of conduct on persons who were not registrants in reliance upon sections of theAct which authorize the Lieutenant Governor-in-Council to make regulations governing the conduct of registrants.

2.13 The provisions of sections 222(1) of the Regulations are to be contrasted with the provisions of section 221. These sections read as follows:

221 Every registrant shall deal fairly, honestly, and in good faith with its customers and clients.

222(1) Every officer, partner, sales person and registered director of a registrant shall deal fairly, honestly, and in good faith with the customers and clients of theregistrant.

222(2) No individual referred to in subsection (1) shall act on behalf of the registrant in connection with any transaction or other act of the registrant that is notin compliance with this Part.

2.14 It is to be noted that in his Decision Fairgrieve J. expressly stated that the motion before him was concerned solely with the validity of S.222(1) of theRegulations.

2.15 It is submitted on behalf of staff that while section 222(1) of the Regulations clearly purports to deal with the conduct of persons other than registrants, it isto be contrasted with section 221 which defines standards of conduct for registrants. This, it is said, brings section 221 within the enabling legislation, section143 of the Securities Act. As we read it, the Decision of Fairgrieve J. was not limited to his finding that section 222(1) purported to regulate conduct of personswho were not registrants. He points out that section 143(6) of the Act which confers power to make regulations classifying registrants into categories andprescribing the terms and conditions of registration in each category may extend to

"continuing requirements after registration that, for example, a certain level of capital be maintained or the particular accounts be kept or submitted. In my view,however, there is a substantial difference between conditions of that nature and a provision creating quasi criminal offences which place in jeopardy not theregistrants registration, but the defendant's personal assets and liberty".

2.16 It is difficult to accept the submission made on behalf of staff as to the effect of and the difference between section 221 and 222(1) in that both sectionsappear in Part XIII of the Regulations where in section 219(1) it is provided that in Part XIII:

"registrant does not include an officer, partner or sales person of a registrant".

2.17 This definition appears to make it clear that the registrants referred to in section 221 do not include individuals. Whether or not Mitchell, as an individualregistrant, comes within regulation 221, it can hardly be argued that an individual registrant is not subject to a review of his registration should it be establishedthat he did not "deal fairly, honestly, and in good faith" with customers and clients. The use of the phrase "its customers and clients" in regulation 221 rathersupports the view that the drafter of the regulation did not mean to include individual registrants within the ambit of section 221.

2.18 It is to be noted, however, that allegation 14(c) relates only to conducting "discretionary trades for clients" which trades are said to have been contrary tosection 221 of the Regulations. Whether or not section 221 is invalid, it is our view that because of the definition in section 219, it cannot apply to a sales personof a registrant as defined in Part XIII.

2.19 The Notice of Hearing, however, refers to section 27 and section 128 of the Act and clearly indicates that in the case of Mitchell, the inquiry will be as towhether or not it is in the public interest to order that his registration should be suspended, cancelled, restricted, or made subject to conditions, or whether heshould be reprimanded or whether certain exemptions should no longer apply to his activities. Thus, the allegations in paragraphs 14(a), (b), and (d) survivewhether or not section 221 of the Regulations is invalid.

2.20 We also note subparagraph (c) relates to conducting discretionary trades for clients. We have nothing before us to indicate either the nature or extent ofdiscretionary trades referred to. It seems to us, however, that Mitchell's conduct with respect to discretionary trades is clearly brought into question by theStatement of Allegations and there may well be room to argue that whether or not section 221 of the Regulations applies to Mitchell if such trades wereconducted in a manner indicating that Mitchell did not deal fairly, honestly, and in good faith with his customers and clients, there may well be room for a findingthat the conduct was contrary to the public interest even if section 221 does not apply to Mitchell. Without deciding that at this time, we will hear argument onthe matter after evidence has been adduced as to the nature and extent of the discretionary trades involved.

2.21 In addition to adopting the argument of Mr. Embry on this matter, Mr. Sternberg submitted that there was clearly a need for specific rules to avoid theexercise of an "unbridled" discretion in determining what is or is not conduct contrary to the public interest. He argued that regulation by prosecution withoutspecific reference to statutory prohibitions could lead to very serious adverse effects upon the reputation of persons concerned without specific guidelines todefine improper conduct. He also argued that if the decision in the Marchment Case were overturned by the Divisional Court to proceed with this hearing wouldbe doing indirectly what the Commission might be prohibited from doing directly. This was based on his proposition that from the beginning the allegationsagainst the Eriksons were inextricably interwoven with the allegations against the Securities Dealers whose conduct has now been separated from these hearings.Except that he was not there to make his submissions when the Marchment Case was heard, these submissions, in our view, do not add to the arguments withrespect to rule making authority which were advanced and rejected in the Marchment Case.

2.22 Accordingly, we dismiss these applications to stay for want of jurisdiction and to stay until the determination of the Marchment Case has been completed.

3.00 Procedural Fairness - Abuse of Discretion - Good Faith

3.01 The argument on these motions was heard April 24 and 25. The main argument being advanced by Mr. Sternberg on behalf of the Eriksons and expandedupon by Mr. Mann on behalf of Mitchell.

3.02 In the course of all the preliminary motions which we have heard, these motions were originally referred to as "Glendale-type motions". They came to bedescribed as "systemic bias motions", but in opening the argument, Mr. Sternberg indicated that in his submission, it would be better to characterize his motionsas being based on the proposition that there has been such a lack of procedural fairness and good faith in all aspects of the investigation leading to the Notice ofHearing and such an abuse of prosecutorial discretion in the conduct of the case that it would now be impossible to hold a hearing in accordance with therequirements of natural justice and, in any event, there is such a reasonable perception of bias in the proceedings to date that they should be quashed.

3.03 Not surprisingly in view of some of the earlier decisions in this matter, he was clear that the allegations of impropriety and potential bias were limited tostaff of the Commission and not to the Commissioners sitting on the preliminary motions and intending to proceed with the hearing on the merits.

3.04 Notwithstanding Mr. Sternberg's able attempt to rephrase the basic grounds for his motion, this is the latest in the lengthy line of challenges to theCommission's jurisdiction based on an alleged bias or perception of bias on the part of the Commission and its staff against Securities Dealers.

3.05 The challenges began with the Ainsley Financial Corporation Case when the Ontario Court (General Division) affirmed by the Ontario Court of Appeal,held that Policy 1.10 of the Commission was invalid in that it was mandatory in form , created substantive legal requirements of a regulatory character andthereby exceeded the scope of regulatory power permitted under the Securities Act (1993) 14 OR (3d) 280 (Blair J); and (1995) 18 OSCB 43 (Ont CA, DubinCJO and Labrosse & Doherty JJA).

3.06 In 1994 while the appeal from the Decision of Blair J and Ainsley was pending, an application for prohibition was brought to stop the Commission fromproceeding with the hearing in this matter as it was then constituted by the Notice of Hearing dated December 15, 1993. The hearing in this matter was thenscheduled to begin September 19, 1994. The parties bringing the application were E.A. Manning Limited and certain of its officers and employees. Theapplication for prohibition also involved another matter involving some of the same parties which had been commenced by Notice of Hearing dated February 1,1994 and was scheduled for hearing June 13, 1994.

3.07 E.A. Manning Limited was a Security Dealer and thus the subject of Policy 1.10. It was argued that the stated purpose of Policy 1.10 and its adoptioncould lead to the conclusion that the question of whether Securities Dealers engaged in unfair sales practices could be considered to have been prejudged. Indelivering the decision of the Divisional Court, Montgomery J., concluded that there could be a reasonable apprehension of bias on the part of members of theCommission who participated in the deliberations leading to the adoption of Policy 1.10 and accordingly found that such apprehension of bias would preclude allmembers of the Commission appointed prior to the fall of 1993 from sitting at the hearing. He expressly found that bias requires a lack of neutrality in thetribunal and that there was no authority that there could be bias by a corporate taint (1994) 18 OR (3d) 97 (May 1994 Div. Ct. CP Montgomery, Dunnet &Howden JJ).

3.08 In May of 1995, the Ontario Court of Appeal affirmed the decision of the Divisonal Court adding that it must be presdumed in the absence of evidence tothe contrary that Commissioners who took no part in the formulation and adoption of Policy 1.10 will act fairly and impartially and will consider the facts of eachcase in discharging their judicative responsibilities (E.A. Manning Ltd., OSC (1995) 23 OR (3d) 257 (Ont CA Dubin, CJO, Labrosse and Doherty JJA). Leaveto appeal to the Supreme Court of Canada was refused.

3.09 The next challenge to the jurisdiciton of the Commission which must be referred to is Re Glendale Securities Inc. et al. The Decision of the Commission isreported at 1996 19 OSCB 3874 and the Decision of the Ontario Court (General Division) on an application for judicial review (a decision of Sharpe J) inAugust 1996 is reported at (1996) 19 OSCB 4721. The application to the Commission for a stay was essentially based upon the ground that there had beenprosecutorial abuse of process by Commission staff. The grounds are fully explored in the Reasons but they amount to an allegation that the EnforcementBranch of the staff had so misconducted itself as to constitute an abuse of process. The main ground was based on a statement by the Director of theEnforcement Branch to a solicitor outside of any hearing from which it could be concluded that the proper penalty in cases involving Securities Dealers whomarket penny stocks would not be governed by the facts of an individual case but, rather, would be driven by a blanket prejudice against all Securities Dealers.

3.10 The statement by the Director of Enforcement was introduced in these proceedings by filing the affidavit of the solicitor made and filed in the GlendaleCase. We dismissed the application made by staff to disregard the affidavit filed in other proceedings and we accord it the same weight that it received in thoseproceedings.

3.11 We do not propose to review the detailed arguments in the Glendale Case. They were all made again before us and we adopt the conclusions reached bythe Commission and by Mr. Justice Sharpe with respect to the conclusions which can be drawn accepting for the purposes of the motion that in the absence of anexpressed denial the statement attributed to the Director of Enforcement was, indeed, made by him. In our view, the finding both by the Commission and by Mr.Justice Sharpe that the standard of behaviour required of Commission staff is not higher than that imposed upon prosecuting counsel in criminal proceedings asstated by the Supreme Court of Canada in our R. v. Power (1994), 1 SCR 601 is the correct standard to be applied. We also agree that the facts fall short of thefacts required to find an abuse of prosecutorial discretion.

3.12 We also expressly adopt the conclusion of Mr. Justice Sharpe as to the fear that the animous expressed by the Director of Enforcement could infect theentire process in any proceedings involving Securities Dealers. That is,

"at this point the evidence does not support that contention. Obviously, however, this finding is retrospective and the applicants are not precluded by the resultof this application from further challenges to those proceedings in light of anything that subsequently transpires".

3.13 Mr. Sternberg argued that where the Commission and Mr. Justice Sharpe based their decisions in Glendale on the absence of evidence in that decision andparticularly the absence of any evidence of direct animus against the respondents involved, there was in the material before us direct evidence from which it mightbe concluded that it was reasonable for Mr. Erikson to conclude that the proceedings as against him are brought in bad faith and amount to an abuse of process.These arguments were primarily based on the affidavit of Glen Erikson sworn August27, 1996. Essentially the arguments are based on previous proceedingsbefore the Commission involving Mr. Erikson and the perception of perceived unfairness in the production process to this date in these proceedings. There canbe no doubt that Mr. Erikson firmly believes that he has not and will not be treated fairly in these proceedings.

3.14 The test for determing whether there is a reasonable apprehension of bias was reviewed at some length in an earlier decision in the motion brought by theEriksons seeking to disqualify a member of the Commission from sitting to decide preliminary motions. The applicable authorities were reviewed at some lengthand we adopt the test as stated in that application, namely: Would an informed person viewing the matter realistically and practically - and having thought thematter through - conclude that it is more likely than not that the Commissioners presiding at the hearing on the merits, whether consciously or unconsciously,would not decide the matter fairly". In our view, there is no basis for such a conclusion in this case (Re Belteco Holdings Inc., et al., (1996) 19 OSCB 6623 at6633 & ff).

3.15 Accordingly, the applications for a stay in these proceedings on the basis of challenges to the Commission's jurisdiction based on an alleged bias orperception of bias however articulated and amplified are dismissed.

4.00 Limitation Period Motions

4.01 In our decision with respect to the application for attendance of witnesses on the limitation period motions of April 4, 1997, we considered the issue arisingunder Section 129 of the Securities Act and the question to be determined in deciding when the two-year period provided in that section starts to run. We statedour view that the period starts to run when the Commission staff has sufficient facts that there are reasonable and probable grounds to commence proceedings.Although we did not explore in detail the basis for this conclusion, we did refer to it as the test applied to proceedings under the Securities Act which are broughtunder the Provincial Court where proceedings are commenced by the laying of an Information. We would refer here to the reasons of Provincial Court JudgeBabe dated 6 September 1996 where he reviewed the authorities extensively and came to the conclusion which we have summarized. It may be useful to add hisadditional observation that "knowledge" implies objective determination of the truth in contrast to "belief" or "suspicion" which imply varying degrees ofsubjective conviction as to the truth.

4.02 We add, however, that when an application is brought as a preliminary matter, the question is not whether the staff has established on the evidence calledthat it did not have reasonable and probable grounds to commence proceedings prior to December 15, 1991, but whether on the evidence there is a triable issueto be determined during the full hearing on the merits. We have no doubt that this has been established.

4.03 On the 19th of December 1991, the Commission's Inquiry Branch received from the TSE a report of trading in Belteco with a covering letter dated the 17thof December 1991. The letter (Exhibit 15, Tab 1) covered a two-volume investigation report (Exhibit 42A and 42B) with the observation that the InvestigationServices Department of the TSE had concluded that there is the possibility of manipulative trading and unwarranted markups on the part of the firm andindividuals who are outside the Exchange's jurisdiction and the matter is referred to the Commission Inquiry Staff for further investigation. The evidenceestablishes that market surveillance at CDN had commenced a review of trading in Belteco in April 1991 and forwarded the information it had accumulated tothe TSE Investigation Services Department in July 1991. While the Inquiries Branch at the Commission must have been aware of an investigation beingconducted at the TSE into Belteco upon receipt of a regular report of investigations in progress, it was according to this regular report (Exhibit 16) one of 111investigations being carried out at the TSE.

4.04 With respect to Torvalon, the chronology established on the evidence is that CDN began surveillance in July of 1991. This matter was referred to the TSEInvestigation Services Department in January of 1992 and according to the CDN report covered trading in Torvalon for the period 16 July to 16 December1991. The period alone suggests that the required knowledge could not have been at hand prior to 15 December 1991. The four-volume report of the TSEInvestigation Services Department regarding Torvalon was forwarded to the Commission Inquiries Branch in June of 1992 (Exhibit 15, Tab 5).

4.05 It was argued by the Respondents that the dates of 19 December 1991 and June 1992 referred to above were not conclusive since the TSE InvestigationServices Department and the CDN Market Surveillance Group are acting as agents of the OSC in their investigatory function. Thus facts known to the agentsshould be attributed to the principal at the time those facts became known to the agent. It was further argued that, no evidence having been called from the TSEor CDN as to what they knew and when they knew it, an adverse inference should be drawn that such evidence would not be helpful to the case to be establishedby the Commission staff. We decline to draw such an inference on this preliminary motion.

4.06 We do not accept that the relevant contracts which have been put in evidence constitute either the CDN or the TSE agents of the OSC for all investigationpurposes of the OSC. Even if that proposition is correct, however, it is our view that the question as to whether all material averments which will form part ofthe case on the merits were within the knowledge of the TSE Investigations Services Department prior to December 15, 1991 can only be determined bycomparing the report prepared by the TSE Investigation Services at about that time with the evidence that is produced during the hearing of this matter on themerits.

4.07 In our view, staff has more than discharged the onus to establish that there is a triable issue which cannot be determined until all of the evidence on themerits has been adduced. Accordingly the application to quash or stay the proceedings based upon the limitation period is dismissed.

5.00 Conclusion

5.01 When we began to hear the preliminary motions which have now finally been dealt with by these Reasons, we were informed that unless the respondentswere successful in quashing or staying the proceedings, there would be applications for judicial review of our decisions. At the conclusion of the argument ofthese matters, we indicated that our decision would be rendered promptly and that we intended to schedule commencement of the hearing on the merits tocommence June 12, 1997.

5.02 This caused apparent consternation among counsel who were immediately concerned as to time availability and time for preparation.

5.03 We indicated that date on the assumption, perhaps incorrectly, that before that time applications for judicial review would be launched and accordingly thehearing date would be postponed.

5.04 To make the matter clear, we do not propose to proceed with the hearing on the merits in the face of an application for judicial review. On the other hand,if no such application is pending, the matter is to be spoken to on June 12, 1997 with a view to establishing an early hearing date which, in our view, should beno later than mid August 1997.

"J. F. Howard"

"G. Patrick H. Vernon"